Taxes on Rental Property Income

It has been said that there are two certainties in life: death and taxes. If you have any form of income above $600, then you are going to have taxes on rental property income to file. When you rent out a property and have tenants, the taxes that you face can be a real headache. Rental income is taxable, but that doesn't necessarily mean that everything you get in monetary payments from a tenant is taxable. For the most part, you have to report all income that you receive during the year. This is true even if you are being paid rent that is past due from the year before. If your tenant is three months behind on rent and pays on January 1, the income gets claimed for the next year instead of the previous year. Here are some other unusual taxes on rental property income to consider so that your tax return this season is as accurate as possible.

Did You Take a Deposit for the First and Last Month's Rent?

If you accepted a payment at the start of a lease for the first and last month's rent, then this is considered taxable rental income. It actually isn't a deposit. It's a future payment. In accounting terms, you are giving your tenant a credit for income received. A deposit is money that your tenant can get back in clearly defined ways - like in a security deposit. This money is considered taxed as rental income in the year it is received.

Did You Take Goods or Services in Exchange for Rent?

Any time you receive rental income, no matter what kind of form it takes, it must be reported for taxing purposes. If you agreed to have a tenant landscape your property in exchange for rent, then you must report the value of that landscaping as income. The value is then taxed just as if you had received cash from your tenant.

Are You Holding a Security Deposit?

If you have money from a security deposit and are holding it for your tenant, then this is not considered income for you. If you have the security deposit in a bank account and are collecting interest on it, then the interest would be considered income that you would need to report. In addition, any costs that are taken out of the security deposit to repair your rental property are not deductions that you can take. It is the tenant's money, it means it is their deduction to take.

Did You Pocket Money From the Security Deposit?

If you took cash and put it in your pocket from the security deposit as compensation for damage, but didn't fix the damage, then you have income that needs to be reported. If the entire security deposit was forfeited and you used a portion of that deposit to make repairs, only the amount that was not used is then considered income. The key term here is “forfeited.” When the deposit is forfeited, the money is no longer the tenant's money. They can deduct the entire expense of the deposit on their taxes. You can then deduct any expenses you have to repair your property out of that money. The taxes on rental income property can sometimes be quite complicated. Use this information to your advantage so that your income can be reported as accurately as possible in the next tax season.

Related

Many times, there are issues between a landlord and a tenant that need to be resolved but are failed to do so, because both parties have gone too far with their actions, and have retaliated in the... More

Where there is a landlord, there will also be a tenant, and it is no surprise that these two parties can only work together once there is some sort of agreement, contract or a binding deal in place.... More

Many landlords find it difficult to write and draft a lease agreement. Since every State has its own general template, it can also be difficult to make sure your lease agreement meets all the criteria... More

If you’re a landlord and want to manage your business in a better way, you should endeavor to get in touch with those industry experts who have the experience and the skills to help you do it. This is... More

When you talk about the most common disputes arising between landlords and tenants, nonpayment of rent has to be there in the list. People rent their properties to earn money, and when a tenant... More

If you have ever rented a living space and have had to move many times, you’d already know how difficult it is to find decent, affordable and secure living premises. A person has to deal with the same... More

Landlords across the state have the prime responsibility to make sure they inspect and up keep their property once they have rented it to the tenants. Inspections can occur monthly or yearly depending... More

Everyone knows that a landlord’s job is not easy. These folks have specific duties and responsibilities that they must perform in order to be fair. Being a landlord is not a position but it is, in... More

Asking for a security deposit is quite common in property dealings. The reason to ask for a security deposit is to have something that would help a property owner recover some of their financial... More

Bad tenants are the worst-case scenario for any landlord; no one wants them, and if someone has them, they want them out in any way possible. There are times when landlords try as much as they can to... More